Yes, we already knew this. Income inequality has been following an upward trend ever since top earners encountered some losses that briefly narrowed the gap between the top and lower economic tiers in the recession that began in 2007. That 273-to-1 ratio in the headline, according to an
analysis by the Economic Policy Institute, doesn't represent as large a chasm as the 441-to-1 ratio of late 2000. But we are headed back toward that record ratio and probably beyond.
Meanwhile, a survey of 1000 adults released Monday by Bankrate.com, found that three out of four Americans are living paycheck to paycheck, half of them having less than enough savings to cover three months' living expenses and a fourth of them having no savings at all. CNN asks the dumb question it fails to answer:
So why aren't Americans saving more?
Last week, online lender CashNetUSA said 22% of the 1,000 people it recently surveyed had less than $100 in savings to cover an emergency, while 46% had less than $800. After paying debts and taking care of housing, car and child care-related expenses, the respondents said there just isn't enough money left over for saving more.
As so many Americans know all too well, the reason in most cases that there isn't money left over has to do with decades of stagnant wages and reduced household income. While the Bankrate.com survey indicates a rise in optimism, the reality is that a large proportion of the jobs being offered now as replacements for the ones that were lost pay less and offer fewer benefits. This isn't just true of McJobs. Workers being hired for positions requiring the same education and skills as they previously needed are also getting paid less.
The reason so many people aren't saving more is simple: They can't.
There's more analysis below the fold.
EPI's analysis delves into the intricacies of the split between CEOS (and the other top executives whose own compensation is lifted by rising CEO pay) and rank-and-file Americans:
This analysis makes it clear that the economy is recovering for some Americans, but not for most. The stock market and corporate profits have rebounded following the Great Recession, but the labor market remains very sluggish. Those at the top of the income distribution, including many CEOs, are seeing a strong recovery while the average worker is still experiencing the detrimental effects of a stagnant labor market. Compensation for private-sector workers fell 0.5 percent over the last year and remains below the 2009 level.
[...]
Depending on the CEO compensation measure, U.S. CEOs of major companies earned 20.1 or 18.3 times more than a typical worker in 1965; this ratio grew to 29.0-to-1 or 26.5-to-1 in 1978 and 58.5-to-1 or 53.3-to-1 by 1989 and then surged in the 1990s to hit 383.4-to-1 or 411.3-to-1 by the end of the recovery in 2000. The fall in the stock market after 2000 reduced CEO stock-related pay (e.g., options) and caused CEO compensation to tumble until 2002 and 2003. [...] By 2012 the stock market had recouped much of the value it lost following the financial crisis. Likewise, CEO compensation has grown from its 2009 low, and the CEO-to-worker compensation ratio in 2012 had recovered to 272.9-to-1 or 202.3-to-1, depending on the measurement of options.
Last month, DSShort built charts, the one above showing real (inflation-adjusted) median household income and the one below comparing real vs. nominal income. It should be noted that household income isn't the same as wages. One reason median income has gone down is because so many households now have at least one person out of work, which has reduced what is available for spending (much less saving) even if another householder is working a job at better wages than before.